The federal scientific research and experimental development (SR&ED) program is a tax incentive program to encourage all Canadian businesses to conduct research and development (R&D) in Canada. In fact, the SR&ED program has been the single largest source of federal funding for industrial R&D performed in Canada for many years, and remains one of the largest federal government programs to support R&D in the country; it is also one of the most generous R&D programs in the world. However, Canada still lags behind other countries in terms of R&D spending. The legislation governing the program is contained in the federal Income Tax Act and Income Tax Regulations and therefore is the responsibility of the Department of Finance. However, the Canada Revenue Agency (CRA) is responsible for the program’s administration. The income tax benefits of the SR&ED incentive program include:
- 35% refundable tax credit for qualifying Canadian-controlled private corporations;
- 15% non-refundable tax credit for other corporations
- tax credits for proprietorship, partnerships, and trusts (refundable, non-refundable, or both)
- a deductible for current SR&ED expenditures, which may be deducted in the year incurred or pooled for deduction in subsequent years (except in the case of partnerships, where the expenditures must be deducted in the year incurred).